Germany may see higher tax revenues, could play role in talks

Reuters Staff

4 Min Read

BERLIN (Reuters) - Germany’s tax revenues are likely to rise more than expected in 2013 and beyond, newspapers reported on Saturday, potentially giving the new government financial leeway and playing a role in coalition talks focused on the economy and energy.

Tax income, boosted already this year by a solid labor market and robust wage increases, could be more than 3 percent higher than last year, when it was roughly 600 billion euros, Frankfurter Allgemeine Zeitung reported in its Saturday edition.

That would be about 3 billion euros more than the 615.2 billion predicted in the last tax estimates in May. In the years to 2018, additional tax take could total as much as 100 billion euros, the newspaper reported.

Chancellor Angela Merkel’s conservatives easily won elections on September 22 but fell short of an absolute majority, and have started negotiations to form a government with the second biggest party, the center-left Social Democrats (SPD).

Her party has been focused on balancing the public budget, while the center-left has campaigned on the need to raise taxes to boost investment and to introduce a nation-wide minimum wage.

Die Welt newspaper reported even bigger tax numbers, also citing tax experts close to the estimates, with an additional seven to eight billion euros in revenues this year.

The finance ministry declined comment on the reports and a spokesman referred to the next tax estimates due on November 7.

Focused on balancing its budget, Germany spent less on infrastructure over the past decade than was needed to keep it in working order, let alone upgrade it.

Government spending on infrastructure fell to 1.5 percent of gross domestic product (GDP) from 2 percent in 1999 and well below the European Union average of 2.5 percent, according to DIW data.

The additional income will be welcome news for both parties, who are debating issues at the core of a potential coalition.

Merkel’s conservatives will push for a reduction in Germany’s debt level to below 60 percent of GDP within 10 years from the current 81 percent, according to a party document obtained by Reuters on Friday.

The document prepared as a guideline for the talks in one coalition working group also includes a commitment to making no new borrowing from 2015.

But Hannelore Kraft of the SPD said there was agreement over the need for investment, even though an SPD spokesman denied reports the parties had already agreed an additional 11 billion euros over four years to be spent on roads and rail tracks.

In an interview with Sueddeutsche Zeitung, Kraft, premier of the most populous state of North Rhine-Westphalia, also said overhauling a renewables law that has sent energy costs soaring would need to take into account job security.

“It is crucial that we keep an eye on prices for users and companies alongside security of supplies,” she told the paper.

Kraft is due to lead the SPD’s delegation in the energy working group and is expected to defend the coal industry, which has a sizeable presence in her state.